MTR Capital, LLC v. Lavida Massage Franchise Development, Inc. et al

Filing 87

FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by District Judge Terrence G. Berg. (AChu)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
MTR CAPITAL, LLC,
17-CV-13552-TGB
Plaintiff,
FINDINGS OF FACT AND
CONCLUSIONS OF LAW

vs.
LAVIDA MASSAGE
FRANCHISE DEVELOPMENT,
INC. et al.,
Defendants.

Joaquin Esquivia, an engineer from Colombia, aspired to open
a business in the United States. Through his company, Plaintiff
MTR Capital (“MTR”), Esquivia and his wife invested in a franchise
opportunity

with

Defendant

LaVida

Massage

Franchise

Development, Inc. (“LaVida”). After the venture failed, MTR
brought this lawsuit against LaVida, its President Peggy Davis,
and its Area Developer Duane Goodwin, claiming that they induced
MTR to invest in a LaVida spa franchise by making false
statements and fraudulent omissions. The parties were unable to
settle their dispute and opted instead for a bench trial, which was
held before the Court over four days between January 27-31, 2020.

1

After the evidence closed, the parties requested the
opportunity to submit proposed findings of fact and conclusions of
law. After carefully considering all of the testimony and
documentary evidence presented at trial, as well as the detailed
post-trial submissions and exhibits filed by both parties, and the
governing law in the area, the Court concludes that the
preponderance of evidence supports Plaintiff’s claim of a violation
of the Florida Deceptive and Unfair Trade Practices Act, and
Plaintiff is entitled to damages in the amount of the initial $39,000
franchise fee. As to all other claims, Plaintiff failed to meet its
burden, and judgment must be entered in favor of Defendants.
INTRODUCTION
LaVida Massage Franchise Development, Inc. is a franchisor
located in Brighton, Michigan. Defendant Peggy Davis is LaVida’s
President. Defendant Duane Goodwin is LaVida’s Area Developer
for the southeast United States.
On February 17, 2015, Plaintiff MTR Capital Inc., through its
owner Joaquin Esquivia, entered into a Franchise Agreement with
LaVida for the operation of a “LaVida Massage” center to be located
in Kendall, Florida. Joint Final Pretrial Order, ECF No. 70,
PageID.1123. Plaintiff alleges his decision to invest approximately
$450,000

into

his

LaVida

franchise

was

based

on

misrepresentations made by the Defendants and that he was
2

eventually forced to shutter the business due to poor performance
after only a year and a half. Id. Plaintiff seeks to recoup his entire
investment, which amounts to $541,644.82 after operating costs
and salaries. Id. at PageID.1121.
Plaintiff brings claims for (1) fraudulent inducement and
misrepresentation; (2) negligent misrepresentation; (3) violations of
Florida’s Deceptive and Unfair Trade Practices Act (“FDUTPA”),
Fla. Stat. §501.203(3); and (4) violations of the Florida Franchise
Act (“FFA”), Fla. Stat. § 817.416.1 Compl., ECF No. 1, PageID.1722.
The crux of Plaintiff’s case turns on three misrepresentations
allegedly made by Defendants before Plaintiff signed the franchise
agreement.

Specifically,

Plaintiff

alleges

that

Defendants

misrepresented (1) the facts concerning the unit-level economics of
LaVida franchises; (2) the amount of the initial investment
required to start a LaVida franchise; and (3) the full story of how
existing LaVida franchises were performing. Joint Final Pretrial
Order, ECF No. 70, PageID.1123.
At trial, Plaintiff presented Esquivia, Davis, Goodwin and
franchise law attorney Keith Kanouse as witnesses. Esquivia
testified regarding the timeline of events in developing the venture,

The parties stipulated to dismissal of their cross-breach of contract
claims. ECF No. 71.

1

3

the content and nature of his communications with Defendants
throughout the process, and the reasons he believes the business
eventually closed. Tr. 1/274/20, ECF No. 72, PageID.1204-58.
Defendant Davis testified to the way that LaVida worked with
franchisees and the nature of the information and guidance it
supplied them, as well as to the success rates of LaVida franchises
on the whole. Tr. 1/28/20, ECF No. 73, PageID.1383-1490; Tr.
1/29/20, ECF No. 74, PageID.1534-39. Defendant Goodwin testified
to the financial management training that he generally gives to
franchisees, to his performance and experiences as a LaVida
franchisee himself, and to specific conversations he had with
Esquivia and his partners regarding financial planning, marketing,
and management. Tr. 1/29/20, ECF No. 74, PageID.1534-1628.
Kanouse testified regarding the presale disclosures required of
franchisors, the required disclosures when a franchisee is
terminated or their business fails, and customs and practices
within the franchise industry. Tr. 1/29/20, ECF No. 74,
PageID.1628-79.
Defendants contend that LaVida did not make any material
misrepresentations or material omissions to Plaintiff regarding
startup costs or the performance of existing LaVida franchises
before Plaintiff signed the franchise agreement. Joint Final Pretrial
Order, ECF No. 70, PageID.1130. Defendants further argue that
4

they did not intend to make any future performance projections to
Plaintiff, and that any losses Plaintiff’s franchise suffered were
caused by Plaintiff’s poor management and excessive building
costs—and not the actions of the Defendants. Id. Benjamin Pryor
and Mark Davis testified for the Defendants. Pryor is Director of
Operations for LaVida and testified to his interactions with
Plaintiff’s representatives during the start-up period of their
franchise and how their performance compared to that of other
LaVida franchisees. Tr. 1/29/20, ECF No. 74, PageID.1680-1702.
Mark Davis, CEO of LaVida, testified as to how he builds
relationships with and supports new franchisees, as well as his
experience working with Plaintiff and the new franchise. Tr.
1/30/20, ECF No. 75, PageID.1709-52.
FINDINGS OF FACT
In August 2014, Joaquin Esquivia, who was living in
Colombia and pursuing an E-2 visa in the United States, contacted
a U.S.-based franchise broker named Bernardo Yibirin to obtain
information regarding franchise opportunities in the United States.
Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No. 72, PageID.121012. Yibirin presented Esquivia with a variety of options. Of those,
Esquivia eventually focused on the opportunity presented by a
LaVida franchise. Joint Final Pretrial Order, ECF No. 70,
PageID.1135; Test. of Joaquin Esquivia, Tr.1/27/20, ECF No. 72,
5

PageID.1210-12. Esquivia was interested in using his investment
in the LaVida franchise to satisfy the E-2 visa’s investment
condition. Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No. 72,
PageID.1301-02. Esquivia enlisted his childhood friend and
business associate Reynaldo Cordoba to help him start up and
eventually run the franchise. Cordoba Dep. 74:2-3, ECF No. 65-1,
PageID.831.
On October 13, 2014, a conference call was held with
Esquivia, Cordoba, Yibirin, and Defendant Duane Goodwin. Id. at
75:12-14, PageID.831. During the phone call, the parties discussed
the LaVida franchise business, but Goodwin stated that he could
not make any specific earnings claims. Of the conversation, Yibirin
testified: “Goodwin. He was very-very professional, very quiet and
not talking about numbers. I asked him, ‘Can you give him more
information?’ ‘I’m sorry; I cannot provide. They have to sign the
FDD, talk with other franchisees, and they can provide the
information.’” Yibirin Dep. 92:9-14, ECF No. 69, PageID.1102.
When asked more specifically “[i]f Duane made any earnings claims
about LaVida Massage franchise during this conference call,”
Yibirin responded, “Never.” Id. at 50:10-13, PageID.1092.
On October 14, 2014, Goodwin sent Cordoba, Esquivia and
Yibirin an email with an attached Excel spreadsheet, which he
stated was “a helpful tool to understand cost and volume impacts
6

on the business as you collect your various data points to evaluate
the franchise opportunity.” Pl.’s Ex. C, ECF No. 1, PageID.73; Test.
of Duane Goodwin, Tr. 1/29/20, ECF No. 74, PageID.1542-51, 156466. The spreadsheet contained “model” income and expense figures
and could be used to project revenue based on data entered into the
form. Cordoba employed the tool by inputting numbers into the
spreadsheet to assess different scenarios. Test. of Joaquin Esquivia,
Tr. 1/28/20, ECF No. 73, PageID.1347-49.
Also on October 14, 2014, LaVida sent Esquivia and Cordoba
franchise documents to review, including LaVida’s 2014 “Franchise
Disclosure Document” (“FDD”). Defs.’ Ex. 1, ECF No. 62-1,
PageID.783. The FDD represented that the estimated initial
investment costs to start a LaVida franchise were $160,250 to
$290,000. Id. The FDD did not include any financial performance
data in “Item 19,” which is where any financial projections made by
a franchisor to a franchisee must be made. Test. of Peggy Davis, Tr.
1/28/20, ECF No. 73, PageID.1388-90. Defendants chose not to
make a disclosure in Item 19 because certain LaVida franchisees
were not performing well, and Defendants believed that disclosing
the performance of the handful of struggling franchisees would
reflect poorly on the LaVida brand. Id. Defendants also failed to
disclose in Item 20 of the FDD that certain franchise locations had

7

ceased operations in 2014, including one in Royal Palm, Florida.
Test. of Peggy Davis, Tr. 1/28/20, ECF No. 73, PageID.1417.
MTR electronically acknowledged receipt of the FDD on
October 20, 2014. Joint Final Pretrial Order, ECF No. 70,
PageID.1137. Esquivia testified that he read the FDD. Tr. 1/27/20,
ECF No. 72, PageIDs.1230, 1236, 1240. Cordoba took only a
superficial look at the FDD. Cordoba Dep. 83:16-19, ECF No. 65-1,
PageID.833. Cordoba does not recall anything in particular that
stood out in the FDD. Id. at 84:1-3, PageID.833. No one from
LaVida represented to Cordoba that the FDD was a simple
standard form document. Id. at 172:3-7, PageID.855. Cordoba felt
the FDD was a legal document that should be reviewed by an
attorney. Id. at 172:20-173:2, PageID.855. Esquivia did not hire an
attorney to review the FDD. Test. of Joaquin Esquivia, Tr. 1/27/20,
ECF No. 72, PageID.1240.
At some point before making the decision to invest, Esquivia
reviewed LaVida’s website, as well as a press release sent to him by
email, both of which touted LaVida’s growth in the southeast
region. Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No. 72,
PageID.1217; Pl.’s Ex. 45, ECF No. 64-1, Page.ID.797. As relevant
here, the website described how LaVida’s Brighton, Michigan
center was supporting itself “[w]ithin a few short weeks” and
“within a few months it was making a profit.” Pl.’s Ex. 264, ECF
8

No. 64-1, PageID.808. The press release described how LaVida
enjoyed growth of more than thirty-five percent (35%) in 2014
alone, how annual revenue had increased by one hundred fortyeight percent (148%), membership sales across the network tripled,
and new clients had increased by one hundred fifteen percent
(115%). Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No. 72,
PageID.1218; Pl.’s Exs. 45, 49, ECF No. 64-1, PageID.797. At trial,
Defendants were unable to substantiate any of the figures above
and admitted that the press release was “poorly written.” Test. of
Peggy Davis, Tr. 1/28/20, ECF No. 73, PageID.1468-77.
Cordoba meanwhile performed an investigation of LaVida’s
operations, including marketing, rent, franchise costs, market
demographics in the Miami area, and city and county zoning
requirements.

Cordoba

Dep.

79:18-94:19,

ECF

No.

65-1,

PageID.832-36. Cordoba also attended a “Discovery Day” on
December 16, 2014 at LaVida’s headquarters in Commerce,
Michigan to learn more about LaVida franchise operations. Joint
Final Pretrial Order, ECF No. 70, PageID.1137. Esquivia and his
wife, Christien Acosta, did not attend. Cordoba Dep. 84:25-85:2,
ECF No. 65-1, PageID.833. Mark Davis and Evan Kaltschmidt,
then LaVida’s Chief Operating Officer, spent Discovery Day with
Cordoba. Test. of Mark Davis, Tr. 1/30/20, ECF No. 75,
PageID.1715. Discovery Day included visits to two LaVida Massage
9

Centers. Cordoba Dep. 121:17-22, 122:13-25, ECF No. 65-1,
PageID.842-43. These are the only franchise visits that were ever
made by Cordoba. Id. at 123:13-15, PageID.843. Cordoba did not
call any other LaVida massage franchise owners as part of his
diligence investigation. Id. at 123:16-18, PageID.843. Esquivia and
Acosta themselves never contacted a LaVida Massage Center prior
to signing the Franchise Agreement. Test. of Joaquin Esquivia, Tr.
1/27/20, ECF No. 72, PageID.1270.
Based on what Cordoba learned, he modeled a range of
financial scenarios: some good and some bad. Cordoba Dep. 138:23139:2, ECF No. 65-1, PageID.847. The scenarios were based on a
modified version of the interactive spreadsheet emailed to him by
Goodwin on October 14, 2014. Id. at 136:11-16, PageID.846.
Cordoba sent the scenarios to Esquivia and Yibirin for their review.
Id. at 136:23-137:2, PageID.846. On January 7, 2015, Yibirin sent
an email to Goodwin attaching the scenarios. He asked Goodwin:
“What do you think? Are they realistic? Any comment will be
appreciated.!!!” Id. at 136:11-16, PageID.937. On January 10, 2015,
Goodwin responded to Yibirin’s email, stating: “Due to legal
restrictions we cannot give specific answers as that would be a
representation. What I will advise is that a more conservative
approach should be used for financial planning.” Defs.’ Exhibit 29,
ECF No. 62-1, PageID.784. The email continued: “My advice is to
10

plan for the worse case (time to achieve and volume levels per day)
for financial purposes and have a more aggressive operating plan.”
Id.; Test. of Duane Goodwin, Tr. 1/29/20, ECF No. 74, PageID.156870. Goodwin believed that some of the inputs Cordoba had entered
into the spreadsheet were extremely high and unrealistic, such as
the ability to perform 120 massages per day. Test. of Duane
Goodwin, Tr. 1/29/20, ECF No. 74, PageID.1566-67.
LaVida presented MTR with a draft Franchise Agreement on
January 28, 2015. This was the contract Esquivia would have to
sign in order to open a LaVida center. Test. of Duane Goodwin, Tr.
1/29/20, ECF No. 74, PageID.1570. Esquivia read the Franchise
Agreement, though he admitted at trial that he did not read it
“carefully enough to understand it.” Tr. 1/28/20, ECF No. 73,
PageID.1376. On February 2, 2015, Esquivia sent an email to
Yibirin, copying Acosta and Cordoba, asking 18 questions about the
Franchise Agreement. Defs.’ Ex. 31, ECF No. 62-1, PageID.784.
Yibirin forwarded the questions in an email to Goodwin on
February 4. Defs.’ Ex. 32, ECF No. 62-1, PageID.785.
Among the questions presented by Esquivia was question 16,
which stated: “There is no clause addressing that if I follow all
procedures and policies of the system I will be profitable.” Defs.’ Ex.
31, ECF No. 62-1, PageID.784. On February 5, 2015, Peggy Davis,
LaVida’s President, sent an email in response to Esquivia’s
11

questions. The email stated that she had “answered most of
[Esquivia’s] questions in the attached revised franchise agreement”
and “I understand your need for a promise of profitability but I can’t
make that promise as everyone’s ideas of ‘following protocols and
procedures’ are different and very subjective. Obviously, it takes
more than just following procedure to make a business successful.
Without a good amount of common sense, hard work, and
determination any business model would surely fail.” Defs.’ Ex. 33,
ECF No. 62-1, PageID.785. Esquivia read that email from Davis.
Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No. 72, PageID.1309.
Revised drafts of the Franchise Agreement were then
exchanged (Defs.’ Exs. 34 and 35, ECF No. 62-1, PageID.785) and
Esquivia signed the final version on February 17, 2015. Defs.’ Ex.
2, ECF No. 65-2, PageID.862. The initial franchising fee was
$39,000. Pl.’s Ex. A, ECF No. 1-1, PageID.29. The Franchise
Agreement has Esquivia’s initials on every page. Id. at PageID.2563. Esquivia did not write anything in the space provided for
describing financial representations. Id. at PageID.61.
Esquivia did not consult an accountant or attorney, other than
immigration counsel, in connection with his due diligence. Joint
Final Pretrial Order, ECF No. 70, PageID.1139. Esquivia did not
contact or visit any existing franchisees. Test. of Joaquin Esquivia,
Tr. 1/27/20, ECF No. 72, PageID.1270.
12

Following execution of the Franchise Agreement, LaVida
helped the MTR team investigate and design suitable space to lease
for their center. Defs.’ Exs. 36, 37, 38, 41, 42, ECF No. 62-1,
PageID.785; Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No. 72,
PageID.1310-14; Test. of Duane Goodwin, Tr. 1/29/20, ECF No. 74,
PageID.1570-73. MTR then selected a location in Kendall, Florida.
Defs.’ Exs. 52, ECF No. 62-1, PageID.786; Test. of Joaquin
Esquivia, Tr. 1/27/20, ECF No. 72, PageID.1315. The location was
in the Crosswinds Shopping Center, adjacent to the anchor tenant,
Publix Supermarket. Joint Final Pretrial Order, ECF No. 70,
PageID.1139.

Cordoba

was

then

in

charge

of

overseeing

construction because Esquivia remained in Colombia. Test. of
Joaquin Esquivia, Tr. 1/27/20, ECF No. 72, PageID.1316.
From October 5-9, 2015, LaVida offered its mandatory fiveday management training session to MTR. Cordoba and Acosta
attended management training. Cordoba Dep. 127:23-25, ECF No.
65-1,

PageID.844;

Acosta

Dep.

30:13-21,

ECF

No.

86-1,

PageID.2016. Esquivia was still in Colombia and did not attend.
Acosta Dep. 30:22-31:1, ECF No. 86-1, PageID.2016. Following the
training, certain reference materials were supplied by LaVida and
were available online for MTR’s use. Test. of Joaquin Esquivia, Tr.
1/27/20, ECF No. 72, PageID.1276-91; Defs.’ Exs. 3-24, ECF No. 621, PageID.783-84. For example, Defendants’ Exhibit 5 is the LaVida
13

Massage 117-page Operations Manual, available to all franchisees
via the LaVida intranet. LaVida also provided pre-opening
marketing assistance. Test. of Duane Goodwin, Tr. 1/29/20, ECF
No. 74, PageID.1576-82.
After construction costs for MTR’s Kendall franchise exceeded
Esquivia’s initial projection by approximately $60,000, Esquivia
and Cordoba had a falling out and Cordoba left the project. Test. of
Joaquin Esquivia, Tr. 1/27/20, ECF No. 72, PageID.1317-25. The
schism erupted when Esquivia asked Cordoba to contribute funds
and Cordoba refused because he believed the agreement between
them was that he would be a partner without investing capital. Id.;
Cordoba Dep. 64:2-10, ECF No. 65-1, PageID.828.
With Cordoba gone, Acosta took charge of the Kendall
franchise opening. Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No.
72, PageID.1332-33. From February 29, 2016 to March 4, 2016, the
week before the franchise opened, Davis conducted on-site training
to assist Acosta before the opening. Joint Final Pretrial Order, ECF
No. 70, PageID.1139; Acosta Dep. 53:22-25, 54:21-23, ECF No. 861, PageID.2021-22; Test. of Mark Davis, Tr. 1/30/20, ECF No. 75,
PageID.1726-27. Davis grew concerned about MTR’s marketing and
management. Test. of Mark Davis, Tr. 1/30/20, ECF No. 75,
PageID.1727-30.

14

On May 25, 2016, Esquivia asked Defendants for help with
marketing. Defs.’ Ex. 68, ECF No. 62-1, PageID.787. His email
contained a chart of MTR’s marketing efforts. Goodwin responded
via email and a telephone meeting was scheduled and held the
following week. Goodwin summarized the phone meeting by adding
comments to the chart contained in Esquivia’s May 25 email and
adding his own marketing suggestions. Defs.’ Ex. 69, ECF No. 621, PageID.787. In his cover email to MTR, Goodwin stated, “I hope
that the attached will help guide you towards more effective
advertising programs. I wish there was a single silver bullet that
works for all locations, but after doing this for 40+ years it has been
my experience that local hard work is the only solution.” Id.
Goodwin continued: “We are here to help and have been in the same
situation as you are. With hard work and effective/reactive
planning, the business will grow.” Id.
In addition to its problems with advertising, MTR experienced
significant managerial and customer relations difficulties upon
opening. For example, MTR went through four lead sales associates
during its short period of operation and never had a facility
operations manager. Acosta Dep. 39:24-42:14, ECF No. 86-1,
PageID.2018-19. By April 2017, approximately one year after
opening, Acosta had grown unhappy managing the franchise and
decided to take another job. Acosta Dep. 62:14-16, ECF No. 86-1,
15

PageID.2024. While it was open, MTR’s LaVida franchise generally
received poor reviews from clients and for some time ranked in the
bottom 10% of LaVida franchises in customer satisfaction. Test. of
Benjamin Pryor, Tr. 1/29/20, ECF No. 74, PageID.1687. Defendants
identified issues with MTR’s marketing, staff management,
customer service, and operations, and provided suggestions to MTR
to address those issues. Test. of Peggy Davis, Tr. 1/28/20, ECF No.
73, PageID.1364-65; Test. of Mark Davis, Tr. 1/30/20, ECF No. 75,
PageID.1735. LaVida’s suggestions were either not adopted, poorly
implemented, or insufficient to remedy the MTR franchise’s
deficiencies. See Test. of Joaquin Esquivia, Tr. 1/28/20, ECF No. 73,
PageID.1364-65; Test. of Mark Davis, Tr. 1/30/20, ECF No. 75,
PageID.1735.
MTR’s franchise closed in late September 2017. Joint Final
Pretrial Order, ECF No. 70, PageID.1140. This lawsuit followed.
CONCLUSIONS OF LAW
As a preliminary matter, this Court must address a choice-oflaw question regarding whether to apply Michigan or Florida law
to the tort claims in this case. A federal court sitting in diversity
applies the choice-of-law rules of the forum state. Klaxon Co. v.
Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed.
1477 (1941). Under Michigan's choice-of-law rules concerning tort
claims, there is a presumption that Michigan law applies unless
16

there is a rational reason to displace it. Standard Fire Ins. Co. v.
Ford Motor Co., 723 F.3d 690, 693 (6th Cir. 2013). To determine
whether there is a rational reason, the Court first asks if there is a
foreign state that would have an interest in the matter, and then
determines

if

Michigan’s

interests

mandate

that

its

law

nevertheless be applied.  Atlas Techs., LLC v. Levine, 268 F. Supp.
3d 950, 961 (E.D. Mich. 2017) (citing Sutherland v. Kennington
Truck Serv., Ltd., 562 N.W.2d 466, 471 (1997)).
Here, Plaintiff is based in Florida, and many of the
representations and communications at issue occurred in Florida,
giving that state an interest in the matter. Neither party has
challenged the application of Florida law at any point in this case,
and the parties’ joint statement of claims (ECF No. 61) exclusively
cites to Florida law. Given these circumstances, the Court finds that
Michigan’s interest in applying its own law is minimal and the
interest in applying Florida law prevails.
I.

Claim One: Fraud/Fraudulent Inducement and
Misrepresentation
The elements of a claim for fraudulent inducement under

Florida law are: “(1) a false statement concerning a material fact;
(2) the representor's knowledge that the representation is false; (3)
an intention that the representation induce another to act on it; and

17

(4) consequent injury by the party acting in reliance on the
representation.”2 Butler v. Yusem, 44 So. 3d 102, 105 (Fla. 2010).
Plaintiff contends that Defendants knowingly overstated the
prospects for success of a LaVida franchise, overstated their
regional expansion and growth figures, and understated the
amount needed for an initial investment. Pl.’s Proposed Findings of
Fact, ECF No. 83, PageID.1940-41. Defendants contend that no
misrepresentations were made, and even if misrepresentations
were made, they were made before the signing of the Franchise
Agreement and were explicitly disclaimed in the Franchise
Agreement’s integration and disclaimer clauses. Defs.’ Post-Trial
Br., ECF No. 80, PageID.1870. The Court will discuss each of the
statements that Plaintiff claims satisfy the elements of fraudulent
inducement and misrepresentation.
a. Website and press release statements
A false statement of fact must “concern a past or existing fact
in order to be actionable.” Thor Bear, Inc. v. Crocker Mizner Park,
Inc., 648 So. 2d 168, 172 (Fla. Dist. Ct. App. 1994). Any “puffing”
statements cannot meet this standard, and it is the responsibility
of the buyer to investigate these kinds of statements that are not

The Court notes that the Joint Statement of Claims states these elements
slightly differently. ECF No. 61, PageID.763-64. There is no material difference in the overall elements of the tort, however, and the Court therefore relies on the phrasing articulated by the Florida Supreme Court.
2

18

clearly based in fact. MDVIP, Inc. v. Beber, 222 So. 3d 555, 561 (Fla.
Dist. Ct. App. 2017.) Therefore, a misrepresentation is also not
actionable “where its truth might have been discovered by the
exercise of ordinary diligence.”  Wasser v. Sasoni, 652 So. 2d 411,
412 (Fla. Dist. Ct. App. 1995).
Here, Plaintiff claims that LaVida’s statements on its website
and in a press release on the website contained actionable
misrepresentations. The LaVida website stated that LaVida was
“the #1 Concept in Health & Wellness Franchising,” described the
business model as “foolproof,” and referenced the sales and
performance outcomes of the first LaVida location in Brighton,
Michigan. Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No. 72,
PageID.1172. The touting of the company as “#1” or the business
model as “foolproof” is the kind of puffery that has been found
inactionable as fraud. See, e.g., MDVIP, 222 So. 2d at 561 (“A
promise to deliver an “exceptional” product or service is a matter of
opinion rather than fact . . . and constitutes non-actionable
puffery.”). At best, it is a close call—at which point Plaintiff had a
duty to further investigate the statements and learn what was
meant by “#1” and “foolproof” rather than take those words at face
value. As to the statistics cited concerning the performance of the
Brighton center, no evidence was presented that the statements
regarding the Brighton location were false.
19

Likewise, with respect to the LaVida press releases touting
growth in the southeast region, though Defendants were unable to
provide concrete documentation or methodology to support some of
the specific numbers cited in the press release, Plaintiff conversely
failed to demonstrate that the figures were unequivocally false.
Test. of Peggy Davis, Tr. 1/28/20, ECF No. 73, PageID.1467-90.
None of the website or press release statements can therefore
support a claim for fraud.
b. 2014 Franchise Disclosure Document statements
Plaintiff claimed that the information in Item 20 of the 2014
FDD was inaccurate regarding the number of franchises that had
opened and closed. The testimony and other evidence presented at
trial proved this claim by a preponderance. See infra Part III.b;
Test. of Peggy Davis, Tr. 1/28/20, ECF No. 73, PageID.1447. For
example, five franchises closed between January and April 2014,
and these closures were not reflected in the 2014 FDD that was
dated July 22, 2014 and provided to Plaintiff in October 2014. Test.
of Peggy Davis, Tr. 1/29/20, ECF No. 74, PageID.1534-39.
But the evidence also showed that such inaccuracies occurred
primarily due to LaVida’s poor recordkeeping. Test. of Peggy Davis,
Tr. 1/28/20, ECF No. 73, PageID.1387-1447. The evidence was not
sufficient to show that LaVida intended to make such a false
statement or intended for Plaintiff to rely on it. Id. The evidence is
20

therefore insufficient to satisfy the second and third elements of a
fraudulent misrepresentation claim with regard to the 2014 FDD.
Butler, 44 So. 3d at 105.
c. Performance projections
Finally, Plaintiff asserts that MTR relied on inaccurate
performance projections made by Defendants, including the “model
spreadsheet,” when making the decision to purchase a LaVida
franchise. In considering Plaintiff’s position, the Court must take
account of the Franchise Agreement’s integration clause and
several of its disclaimers. Section XXIV of the Franchise Agreement
is titled “NO PROJECTIONS OR REPRESENTATIONS.” The
section states:
You acknowledge and represent that you have not
received from us any projections or representations
regarding the amount of income it can expect to earn
from the franchise granted hereby. You acknowledge
that no representations or warranties inconsistent with
the Offering Circular or this Agreement were made to
induce you to execute this Agreement.
You acknowledge that neither us nor any person
can guarantee the success of your business.
You are entering into this Agreement after having
made an independent investigation of our operations.
You understand that the business venture contemplated
by you under this Agreement involves a high degree of
financial risk and depends to a large extent upon your
abilities.
The undersigned Franchisee, by signing this
Franchise Agreement, acknowledges that he or she has
read same and that he or she has been requested to state
21

in writing hereafter any terms, claims, covenants,
promises or representations, including representations
as to any income or gross revenue projections that were
made to him or her by Franchisor.
If no such representations, etc., were made, the
undersigned should write the word ‘none’ on the
following lines:
Pl.’s Ex. A, ECF No. 1-1, PageID.61.
The precedent developed by the Florida courts is less than
uniform concerning the legal effect of integration and disclaimer
clauses on common law fraud claims. See Asokan v. Am. Gen. Life
Ins. Co., 302 F. Supp. 3d 1303, 1315 (M.D. Fla. 2017) (“there seems
to be disagreement amongst Florida courts on the issue of whether
a non-reliance clause negates a claim for fraud”); Billington v. GinnLa Pine Island, Ltd., LLLP, 192 So. 3d 77, 80 (Fla. Ct. App. 2016)
(collecting cases and describing split among Florida state courts on
the issue). Some Florida courts have held that integration and
disclaimer clauses bar fraud claims as a matter of law, some have
held the opposite, and the Eleventh Circuit, applying Florida law,
recently struck a middle ground. This Court finds the last approach
most persuasive. In Global Quest, LLC v. Horizon Yachts, Inc., the
Eleventh Circuit held that disclaimer clauses “may constitute
evidence against plaintiff's fraud allegations, but plaintiff's [fraud]
claims are not precluded as a matter of law.” 849 F.3d 1022, 1028
(11th Cir. 2017). Specifically, “an integration clause [may
22

constitute] evidence[] that neither party has relied upon the
representation of the other party made prior to the execution of the
contract.” Id. (quoting Beeper Vibes, Inc v. Simon Property Grp.,
Inc., 600 Fed. App’x 314, 318-19 (6th Cir. 2014) (also applying
Florida law)).
Here, Plaintiff read the Franchise Agreement and initialed
below the integration and disclaimer clause. Test. of Joaquin Davis,
ECF No. 72, PageID.1271; Pl.’s Ex. A, ECF No. 1-1. Plaintiff did not
write anything in the space where he was required to list “any
terms, claims, covenants, promises or representations, including
representations as to any income or gross revenue projections that
were made to him or her by Franchisor.” Pl.’s Ex. A, ECF No. 1-1,
PageID.61. There is thus “some evidence” of a lack of any reliance
on prior representations afforded by the integration clause.
Plaintiff asks the Court to give less weight to the integration
clause because he did not consult an attorney before signing the
Franchise Agreement (other than an immigration attorney) and
admitted at trial that he did not read the Franchise Agreement
closely. Test. of Joaquin Davis, Tr. 1/28/20, ECF No. 73,
PageID.1376. But “[t]he law necessarily presumes that parties to a
contract have read and understood its contents” and that they have
“respect[ed] the gravity inherent in the contracting process and
carefully

review[ed]

a

contract
23

to

ensure

that

material

representations are expressed in the instrument.” Billington, 192
So. 3d at 84. Here, Plaintiff admittedly did no such thing and seeks
to avoid the consequences of his inattention to detail.
Plaintiff’s failure to read and understand the significance of
the integration and disclaimer clause in the Franchise Agreement
must be seen against a backdrop of explicit warnings from
Defendants that they could not guarantee Plaintiff’s franchise
would be profitable. Specifically, in response to a question from
Plaintiff about why there was no guarantee in the Franchise
Agreement that he would be profitable if he followed LaVida’s
procedures, Davis told Plaintiff that she “underst[oo]d [Plaintiff’s]
need for a promise of profitability but I can’t make that promise as
everyone’s ideas of ‘following protocols and procedures’ are different
and very subjective. Obviously, it takes more than just following
procedure to make a business successful. Without a good amount of
common sense, hard work, and determination any business model
would surely fail.” Defs.’ Ex. 33, ECF No. 62-1, PageID.785. In light
of these facts, Plaintiff’s claims that he relied on Defendants’ future
performance projections and considered them material in his
decision to invest in a LaVida franchise must be weighed against
Plaintiff’s failure to mention the performance projections he was
relying on both in the Franchise Agreement or in response to the
email from Davis sent directly to Plaintiff. If Plaintiff considered
24

such representations material, he could have and should have listed
them or responded to Davis by informing her that he was relying
on them. That he did not do so allows an inference of a lack of
reliance.
Considering this record, the evidence shows that MTR failed
to meet its burden in proving reliance by a preponderance of the
evidence. The Court cannot excuse Plaintiff from its responsibility
to prove this element of a fraudulent inducement claim simply
because Mr. Esquivia did not to seek the assistance of a business
attorney or because he neglected to read carefully the contract he
was signing. See Saunders Leasing System, Inc. v. Gulf Central
Distribution Ctr., Inc., 513 So. 2d 1303 (Fla. Ct. App. 1987) (holding
that plaintiff would have listed representations in contract if they
were material and relied upon). Consequently, the Court finds that
Plaintiff failed to prove his fraudulent inducement claim.
II.

Claim Two: Negligent Misrepresentation
The elements of negligent misrepresentation are: “(1) a

misrepresentation of material fact that the defendant believed to be
true but which was in fact false; (2) that defendant should have
known the representation was false; (3) the defendant intended to
induce the plaintiff to rely on the misrepresentation; and (4) the
plaintiff acted in justifiable reliance upon the misrepresentation,

25

resulting in injury.” Arlington Pebble Creek, LLC v. Campus Edge
Condo. Ass'n, Inc., 232 So. 3d 502, 505 (Fla. Ct. App. 2017).
The

elements

of

negligent

misrepresentation

require

justifiable reliance, as opposed to merely reliance. Id. As discussed
above, Plaintiff has failed to prove the elements of a fraudulent
inducement claim. Because Plaintiff has failed to meet the lower
burden of proving reliance under a fraudulent inducement claim,
Plaintiff cannot meet the higher burden of showing that he
justifiably relied on misrepresentations made by Defendants.
Consequently,

Plaintiff

also

fails

to

prove

his

negligent

misrepresentation claim by a preponderance of the evidence.
III. Claim Three: Violations of Florida’s Deceptive and
Unfair Trade Practices Act (FDUTPA)
The FDUTPA prohibits “[u]nfair methods of competition,
unconscionable acts or practices, and unfair or deceptive acts or
practices in conduct of any trade or commerce . . . .” Fla. Stat. §
501.204(1). The FDUTPA goes on to specifically provide that “[i]t is
the intent of the Legislature that . . . great weight shall be given to
the interpretations of the Federal Trade Commission” and that
violations of the FTC Act, 15 U.S.C. § 41 et seq., will constitute
violations of the FDUTPA. Fla. Stat. §§ 501.203(3)(a), 204(2). A
claim under the FDUTPA has three elements: (1) a deceptive or
unfair practice; (2) causation; and (3) actual damages. Siever v.
26

BWGaskets, Inc., 669 F. Supp. 2d 1286, 1292 (M.D. Fla. 2009).
Unlike a claim under the FFA, a plaintiff bringing a claim under
the FDUTPA does not need to prove actual reliance on the alleged
conduct. Cold Stone Creamery, Inc. v. Lenora Foods I, LLC, 332 F.
App’x 565, 567 (11th Cir. 2009) (unpublished). Instead, “the
plaintiff must prove that “the alleged practice was likely to deceive
a consumer acting reasonably in the same circumstance.”” Id.
(citing State, Office of the Att'y Gen. v. Commerce Comm. Leasing,
LLC, 946 So.2d 1253, 1258 (Fla. 1st DCA 2007)).
Plaintiff contends that Defendants violated the FDUTPA by
committing deceptive and unfair trade practices in violation of an
FTC regulation, 16 C.F.R. § 436, which governs franchising
disclosure requirements and prohibitions. Specifically, Plaintiff
points to three separate acts that it alleges violate four sections of
16 C.F.R. § 436: § 436.9(c), § 436.5(g), § 436.5(t), and § 436.7(b). The
Court finds that Plaintiff successfully alleges a violation of 16
C.F.R. § 436.7(b).
a. Financial performance representations
First, Plaintiff cites 16 C.F.R. § 436.9(c), which states that it
is a violation of the FTC Act (and therefore a violation of the
FDUTPA) for a franchise seller to “[d]isseminate any financial
performance representations to prospective franchisees unless the
franchisor has a reasonable basis and written substantiation for the
27

representation at the time the representation is made, and the
representation is included in Item 19 (§ 436.5(s)) of the franchisor's
disclosure document.” Plaintiff claims that Defendants violated this
regulation when they made financial performance representations
to Plaintiff 1) in the “model” financial spreadsheet, 2) at the
December 2014 Discovery Day meeting, 3) during an October 14,
2014 videoconference, 4) on the LaVida website, and 5) in the text
of the LaVida press releases. Pl.’s Proposed Findings of Fact, ECF
No. 83, PageID.1933.
Here, with respect to the alleged 16 C.F.R. § 436.9(c)
violations, as discussed above, the Franchise Agreement contained
an integration and disclaimer clause that explicitly disclaimed any
financial performance representations made outside of the FDD
(which did not make any such representations). Defs.’ Ex. 2 at 37,
ECF No. 62-1, PageID.785. Again, Plaintiff signed the Franchise
Agreement without closely reading it or reviewing it with an
attorney. An objectively reasonable franchisee would have reviewed
the document with counsel and would not have relied on any
financial performance representations made by Defendants before
signing the Franchise Agreement, because a reasonable franchisee
would have recognized that such representations were explicitly
disclaimed in the Franchise Agreement. Plaintiff’s conduct was not
that of a reasonable franchisee. Further, after Plaintiff asked why
28

the Franchise Agreement did not contain a guarantee of
profitability, Defendants clearly informed Plaintiff in an email that
they could not guarantee that Plaintiff’s business would be
successful. Defs.’ Ex. 33, ECF No. 62-1, PageID.785. In light of such
direct statements of disclaimer, a reasonable franchisee would have
recognized that Defendants were not providing a guarantee that
the endeavor would be financially successful, and an objectively
reasonable franchisee would have known to thoroughly investigate
the risks of his or her investment beforehand.
To that end, Plaintiff was encouraged to perform his own due
diligence on the LaVida franchises by Defendants. Plaintiff was
given the contact information for LaVida franchisees so that he
could contact them. Test. of Joaquin Esquivia, Tr. 1/27/20, ECF No.
72, PageID.1270. Plaintiff left the task up to Cordoba, who
performed a minimal investigation and failed to call a single
franchisee. Here again, Plaintiff did not perform in the manner of a
reasonable franchisee. A reasonable franchisee would have
performed a thorough investigation, which would have included
contacting numerous franchisees and discussing their businesses
with them. A reasonable franchisee would not have relied on or
been misled solely by any disclaimed performance projections made
by LaVida, including the model spreadsheet, LaVida’s press
releases, or LaVida’s website.
29

b. Estimated initial investment representation
Second, 16 C.F.R. § 436.5(g) requires a franchise seller to
disclose

“the

franchisee's

estimated

initial

investment.”

Plaintiff argues that Defendants violated 16 C.F.R. § 436.5(g) by
misstating the initial investment amount required to start a new
franchise. Pl.’s Proposed Findings of Fact, ECF No. 83,
PageID.1935. Item 7 of the FDD discloses an anticipated initial
investment between $160,250 to $290,000. Id. at PageID.1905-06.
Plaintiff spent $479,000. Id. at PageID.1936. Plaintiff contends that
Defendants’ estimates were inaccurate.
The FTC requires only that franchisors have a “reasonable
basis” for providing specific figures in Item 7 of the FDD. 16 C.F.R.
§ 436.9(c). In the evidence before the Court, Plaintiff failed to prove
that Defendants did not have a reasonable basis for providing the
startup costs listed in the FDD. At trial, it was established that
LaVida based its figures on the initial startup costs for three
Michigan locations, but primarily on the location in Commerce,
Michigan that opened in 2010. Test. of Peggy Davis, Tr. 1/28/20,
ECF No. 73, PageID.1455-57. Moreover, at trial, the Court heard
evidence that Plaintiff overspent his construction budget by
$60,000 and he improperly included $100,000 of his own salary in
the initial investment calculation. Test. of Keith Kanouse, Tr.
1/29/20, ECF No. 74, PageID.1668. Properly calculated, Plaintiff’s
30

actual initial investment was approximately $300,000—within
$10,000 of the range provided by LaVida on the FDD. Id. Therefore,
the Court finds no violation of 16 C.F.R. § 436.5(g).
c. Representations regarding number of existing and
closed outlets
Third, 16 C.F.R. § 436.5(t) requires a franchise seller to
disclose “the total number of franchised and company-owned
outlets for each of the franchisor’s last three fiscal years” in Item 20
of the FDD. Additionally, 16 C.F.R. § 436.7(b) instructs franchise
sellers to make quarterly updates to the FDD “to reflect any
material change to the disclosures included.” Plaintiff argues that
Defendants violated 16 C.F.R. § 436.5(t) and § 436.7(b) by including
inaccurate or incomplete information regarding existing and closed
franchises in the FDD. Id. at PageID.1937.
At trial, Plaintiff proved that the FDD contained several
inaccuracies at the time it was issued in July 2014. Not only did
LaVida fail to update the FDD with relevant information from
2014, it was not completely accurate with regard to information
LaVida had at the end of 2013. First, the 2014 FDD represented
that there were a total of fifty-four LaVida franchised centers in
operation throughout the United States, with two locations then
open in Florida and two more projected to open as of the end of the
time period upon which the 2014 data was based (i.e. as of
31

December 31, 2013). Pl.’s Tr. Ex. 25 at 23–31, ECF No. 64-1,
PageID.796. At the time the FDD was created, however, and by the
time MTR received the FDD in October, there were only forty-eight
locations open. Test. of Peggy Davis, Tr. 1/28/20, ECF No. 73,
PageID.1415-21. The 2014 FDD did not indicate that five locations
(Royal Palm, FL (April 2014); Oak Park, MI (March 2014); Foxcroft,
NC (January 2014); Mandeville, LA (February 2014); and Excelsior,
MN (March 2014)) had closed by the time the FDD was finalized in
July 2014 and later furnished to MTR in October. Pl.’s Tr. Ex. 25 at
23–31, ECF No. 64-1, PageID.796. Second, the 2014 FDD does not
reflect the closing of the Thousand Oaks, CA location, which
occurred in 2012. Test. of Peggy Davis, Tr. 1/28/20, ECF No. 73,
PageID.1414-15. Third, the 2014 FDD indicated that there was only
one franchise closure in 2013 when there were actually two
closures. Id. at PageID.1439.
Regarding the first set of errors, Defendants’ testimony at
trial was that there was no obligation to update the FDD with any
information from 2014. Specifically, it was established at trial that
Plaintiff is only required by FTC rules to fully update the FDD once
a year, which Plaintiff did. 16 C.F.R. § 436.7(a). However, it was
also established that franchisors must “within a reasonable time
after the close of each quarter of the fiscal year, prepare revisions
to be attached to the disclosure document to reflect any material
32

change to the disclosures included.” 16 C.F.R. § 436.7(b). Once such
a revised document is made, potential franchisees should receive an
FDD that reflects any revisions as of the “most recent period
available at the time of disclosure.” Id. Mr. Kanouse’s testimony
confirmed that franchisors must make a quarterly supplement if
there has been any “material change in the information” in the
FDD. Tr. 1/29/20, ECF No. 74, PageID.1673-74.
Information on the number of franchise units open and closed
at any given time is a material fact about the franchise opportunity.
See, e.g., Cluck-U Chicken, Inc. v. Cluck-U Corp., 358 F. Supp. 3d
1295, 1313 (M.D. Fla. 2017) (finding an actionable FDUTPA claim
when franchisor failed to provide franchisee with updated
disclosure document showing closures from that year). When
questioned by the Court, even Ms. Davis confirmed that whether
franchise closures had occurred is something that “a reasonable
person would probably want to know” before buying a franchise. Tr.
1/29/20, ECF No. 74, PageID.9-10. Defendant was thus required to
update the FDD in March, June, and September with the first,
second, and third quarter 2014 closures and any other material
changes, and subsequently provide MTR with that updated copy of
the 2014 FDD. The Plaintiff has shown that Defendants committed
a deceptive or unfair trade practice by not doing so.

33

Next, Plaintiff must prove that these FDD inaccuracies
caused MTR’s damages. See Siever, 669 F. Supp. 2d at 1292.
Esquivia admitted at trial that he did not seek to contact any open
or failed franchises listed in the 2014 FDD before signing the
Franchise Agreement. Tr. 1/27/20, ECF No. 72, PageID.1270.
However, he did testify to reviewing the 2014 FDD. Test. of Joaquin
Esquivia, Tr. 1/27/20, ECF No. 72, PageID.1240. He noted that
there was “no indication” from any of the documents provided to
him by LaVida that there were some franchise locations that were
unsuccessful, and that he believed that all LaVida locations “were
actually successful.” Id. at PageId.1243-44. He was not told about
any Florida locations that were not successful, though there was at
least one that had closed before he received the 2014 FDD. Id. He
noted that one of his reasons for choosing to invest in LaVida
specifically was the documentation he was provided with, including
the 2014 FDD, indicating “a proven business model” that was
“successful” and “growing.” Id. at PageID.1309. Consequently,
Plaintiff has shown that Defendants’ representations about the
success of their business, specifically their representations about
the number of franchises open and in business, were a causal factor
in Plaintiff’s decision to sign the Franchise Agreement and invest
in the Kendall franchise.

34

Plaintiff does not have to prove actual reliance, but rather
that LaVida’s actions would have been likely to deceive a
reasonable consumer under the same circumstances. If, in October
2014, Plaintiff had been properly provided both the 2014 FDD and
quarterly updates through the third quarter of 2014, it would have
shown forty-eight open locations, a change from the fifty-four figure
in Table 1. Pl.’s Tr. Ex. 25 at 23, ECF No. 64-1, PageID.796. It also
would have shown that five locations had already closed in 2014,
including one in Florida, Plaintiff’s target market. This would have
contrasted with zero closings in 2011, one in 2012, and one in 2013.
Id. at 31. It is reasonable to conclude that a potential franchisee in
Plaintiff’s circumstances would have had a different reaction to the
FDD if they had seen that LaVida had experienced five closures in
2014, and that one of those closures had occurred in Florida. At the
very least, they might have engaged in a more thorough inquiry
prior to signing the Franchise Agreement. This evidence of
causation therefore satisfies the second element of the claim.
However, Plaintiff did not establish at trial that the losses
from that point forward were caused by the omissions of the
Defendants, rather than by Plaintiff’s own mismanagement of the
franchise. Defendants provided extensive testimony that Plaintiff’s
franchise was in the bottom 10% of LaVida franchises in customer
satisfaction, received poor online reviews, suffered from high rates
35

of staff turnover, overspent on its construction budget, and failed to
effectively advertise—even after Defendants provided advertising
suggestions, which in some cases were not implemented. Test. of
Joaquin Esquivia, Tr. 1/28/20, ECF No. 73, PageID.1364-65; Test.
of Benjamin Pryor, Tr. 1/29/20, ECF No. 74, PageID.1687; Test. of
Mark Davis, Tr. 1/30/20, ECF No. 75, PageID.1735. Such
mismanagement

severed

the

causal

chain

between

any

misstatements made by Defendants on the FDD and losses suffered
by Plaintiff once they began preparing and operating the franchise.
The FDUTPA provides for an injured party to receive actual
damages. Fla. Stat. § 501.211(2). Normally, Florida courts look for
a diminution in value or a “gap in value between what was promised
and what was delivered” to measure actual damages under the
FDUTPA. State Farm Mut. Auto. Ins. Co. v. Performance
Orthapaedics & Neurosurgery, LLC, 315 F. Supp. 3d 1291, 1310
(S.D. Fla. 2018). This standard is more easily applied to a physical
product or service than to a franchise agreement. However, given
the nature of the facts of this case, the measure of damages can be
more straightforward: we can look to the expenditures that Plaintiff
made at any given point in time in furtherance of the business
venture. Here, Plaintiff does not allege any financial expenditures
prior to the signing of the Franchise Agreement other than the
franchise fee. The Court has determined that any damages after the
36

signing of the Franchise Agreement are not actionable because of
Plaintiff’s failure to show causation. Therefore, Plaintiff’s actual
damages are best represented by the franchise fee, $39,000.
IV.

Claim Four: Violations of the Florida Franchise Act

Per the Florida Franchise Act (“FFA”), franchisors may not:
1. Intentionally . . . . misrepresent the prospects or
chances for success of a proposed or existing franchise or
distributorship; 2. Intentionally . . . . misrepresent, by
failure to disclose or otherwise, the known required total
investment for such franchise or distributorship; or 3.
Intentionally . . . . misrepresent or fail to disclose efforts
to sell or establish more franchises or distributorships
than is reasonable to expect the market or market area
for the particular franchise or distributorship to sustain.
Fla. Stat. § 817.416(2)(a)1-3. A franchisee must show detrimental
reliance in order to establish a claim under the FFA. Cold Stone
Creamery, Inc. v. Lenora Foods I, LLC, 332 F. App’x 565, 567 (11th
Cir. 2009) (unpublished). If a franchisee is able to prove a violation,
the statute provides that the franchisee may recover “all moneys
invested in such franchise or distributorship” as well as costs and
attorney’s fees. Fla. Stat. § 817.416(3).
Here, as previously discussed, Plaintiff failed to establish that
Defendants’ initial investment estimates were inaccurate, and the
Franchise Agreement contained an integration clause and detailed
disclaimer of any financial performance projections made before the
signing of the agreement. Pl.’s Ex. A, ECF No. 1-1, PageID.61.
37

Plaintiff signed without indicating he was relying on any
projections made by Defendants. Id. Plaintiff was explicitly told by
Defendants they could not guarantee his franchise would be
successful. Defs.’ Ex. 33, ECF No. 62-1, PageID.785. Plaintiff was
also advised to perform an independent assessment of the
franchise’s prospects for success and relied on Cordoba to do so.
Cordoba Dep. 79:18-94:19, ECF No. 65-1, PageID.832-36. Cordoba
performed his own investigation of the franchise’s prospects. Id.
Cordoba attended “Discovery Day” at LaVida’s headquarters in
Commerce, Michigan, in December of 2014, and was given contact
information for other LaVida franchisees so that he could contact
them himself (he did not). Id. at 123:16-18, PageID.843. Viewing all
the facts surrounding Plaintiff’s decision to sign the Franchise
Agreement, the Court finds that Plaintiff has failed to establish
that he detrimentally relied on any specific performance
projections. See Cold Stone Creamery, 332 F. App’x at 567 (finding
plaintiff failed to establish detrimental reliance when “franchise
agreement included a detailed disclaimer and explanation
regarding the risks of owning and operating a franchise and
encouraged franchisees to conduct an independent investigation of
their prospects for success”); Beaver v. Inkmart, LLC, No. 12-60028,
2012 WL 3822264, at *6 (S.D. Fla. 2012) (“Plaintiffs cannot satisfy
the detrimental reliance requirement, as the Franchise Agreement
38

contained a detailed disclaimer . . . and even required Plaintiff to
set forth in writing any representations that previously had been
made regarding the prospects or chances of success of the Inkmart
franchise.”).
CONCLUSION
The evidence presented shows by a preponderance that
Defendant’s failure to provide an accurate, updated Franchise
Disclosure Document as required by 16 C.F.R. § 436.5(t) and
436.7(b) violated the FDUTPA. Consequently, the Court awards
damages in the amount of the franchise fee, $39,000.
As to Plaintiff’s claims of fraud, fraudulent inducement,
misrepresentation, negligent misrepresentation, and violations
under the Florida Franchise Act, Defendants are entitled to
judgment on all of these remaining claims. Parties who wish to file
requests for attorney’s fees have 14 days to do so. Fed. R. Civ. P.
54(d)(2)(B)(i).
Let judgment be entered in accordance with these findings of
fact and conclusions of law.
IT IS SO ORDERED.
Dated: November 6, 2020

s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE

39